Can You Refinance a Mortgage?

What Is Mortgage Refinancing and Why Do You Need It?

Mortgage refinancing is taking out a new loan to fully repay an existing mortgage. The borrower signs a contract with the same or a different bank on more favorable terms, and the funds are used to close the previous obligation. Further payments are then made according to a new schedule — generally with a lower interest rate, longer term, or in a different currency.

The main reasons for refinancing:

• Lowering the interest rate — the main driver. Even a difference of 1–2% per annum can save thousands of dollars over the long term.
• Changing the loan currency — switching from Turkish lira to US dollars or euros to reduce currency risks.
• Extending the term — reducing the monthly payment and lowering the debt burden.
• Debt restructuring — when the borrower is having difficulty servicing the debt.

Can You Refinance a Mortgage in Turkey: A Short Answer

Yes, mortgage refinancing in Turkey is possible — for both citizens and foreigners. However, the Turkish mortgage market has its own peculiarities that distinguish it from European or American markets. The refinancing instrument is not as widespread here, and not every bank offers a classic refinancing program. More often, it involves restructuring the existing loan within the same bank or paying off the current loan and then taking out a new one — on revised terms.

According to the Banking Regulation and Supervision Agency (BDDK), in 2025 the regulator expanded the possibilities for restructuring retail loans, including mortgages: borrowers can now request a revision of terms with an extension of the repayment period up to 48 months. This is especially relevant against the backdrop of the Turkish Central Bank's high key interest rate, which is held at 50%.

Features of the Turkish Mortgage Market: What You Need to Know Before Refinancing

Two Worlds of Rates: Lira vs. Foreign Currency

The key feature of the Turkish market is the colossal gap between rates in the local currency and in foreign currencies. In 2025–2026, a mortgage in Turkish lira (TRY) costs the borrower 30–40% per annum, while loans in dollars or euros can be obtained at 3–9% per annum. This fundamentally affects the logic of refinancing:

• Refinancing a lira loan into a foreign currency loan — the most popular scenario. The borrower gets rid of exorbitant interest rates but assumes currency risk: if the lira depreciates sharply, the debt in lira terms could increase.
• Refinancing a foreign currency loan — makes sense if the market offers a lower interest rate. For example, reducing the rate from 8% to 5% per annum on a $200,000 amount over 10 years saves more than $30,000.
• Refinancing within lira — only makes sense if market rates fall significantly, which is not observed in the current high-inflation cycle.

Who Can Refinance: Borrower Requirements

Foreigners have the right to refinance a mortgage in Turkey, but the requirements are stricter than for citizens. The bank will assess:

• Credit history — both in Turkey (through Kredi Kayıt Bürosu) and in the country of citizenship.
• Verifiable income — employer certificates, tax returns, bank statements for 6–12 months.
• Residence permit — having or not having a residence permit. Without a residence permit, the choice of banks narrows, but options remain.
• Age — from 18 to 70 years at the end of the loan term.
• Property valuation — mandatory appraisal (ekspertiz) by a licensed appraiser.

LTV Ratio and Down Payment

When refinancing, the bank reassesses the loan-to-value ratio (LTV). For foreigners, LTV is typically 50–70% of the property’s appraised value. This means the borrower’s equity in the property must cover at least 30–50% of its price. If the market value of the apartment or villa has increased since the initial purchase, this improves the refinancing terms. If it has decreased, an additional payment may be required.

Mortgage Restructuring: An Alternative to Classic Refinancing

In Turkish practice, the terms "refinancing" and "restructuring" often overlap. Restructuring means changing the terms of the current agreement without taking out a new loan. In 2025, BDDK allowed banks to restructure mortgage and consumer loans for up to 48 months. What this gives the borrower:

• Extending the loan term — reducing the monthly payment without changing banks.
• Payment holidays — deferral of principal or interest for an agreed period.
• Debt consolidation — combining the mortgage with other consumer loans into one payment.

Restructuring is particularly useful if the borrower's financial situation has deteriorated and classic refinancing is unavailable due to a lowered credit rating. However, it is important to understand: extending the term means an increase in total overpayment, even with a reduced monthly payment.

Step-by-Step Algorithm for Mortgage Refinancing in Turkey

1. Audit the current loan. Request from the bank a statement of the remaining debt, payment schedule, and exact interest rate. Find out the early repayment penalty — under Turkish Consumer Protection Law (No. 6502, Art. 36), the borrower has the right to early repayment, but the bank may charge a fee of up to 2% of the outstanding balance.
2. Compare offers. Gather terms from at least three banks. Key parameters: nominal rate, effective rate (including all fees), term, currency, LTV requirements. Banks that work with foreigners include: Garanti BBVA, Yapı Kredi, Türkiye Finans, İş Bankası, DenizBank.
3. Property valuation. Order an ekspertiz from a licensed SPK company. The report will show the real market value of the property — this will determine the maximum amount of the new loan.
4. Submit an application. Provide a package of documents: international passport, İkamet (residence permit), tax number (Vergi Kimlik Numarası), income certificates, bank statements, Tapu (title deed), valuation report.
5. Approval and closure of the old loan. After approval, the new bank transfers the funds directly to the old bank. The previous mortgage is closed, and a record of the new encumbrance is entered in the Tapu.

Hidden Costs of Refinancing

The interest savings can be partially offset by associated costs. Consider the following items:

• Early repayment fee (erken kapama ücreti) — up to 2% of the outstanding balance.
• New loan origination fee (kredi tahsis ücreti) — 0.5–2% of the amount.
• Property appraisal (ekspertiz ücreti) — from 5,000 to 15,000 TRY.
• Insurance — mandatory DASK (earthquake insurance) and, typically, borrower's life insurance.
• Notary and registration fees — changes to the Tapu when switching the lending bank.

Total associated costs can amount to 2–5% of the new loan amount. Before making a decision, calculate the break-even point: how many months it will take for the interest savings to cover the one-time costs.

When Refinancing Really Pays Off

Situations where refinancing is justified in Turkish realities:

• Switching "lira → foreign currency". If your loan is in TRY at 35% per annum and the bank offers refinancing in USD at 6%, the savings are colossal. But remember the currency risk: if the lira sharply depreciates, servicing a foreign currency debt will become harder if your income is in TRY.
• Reducing the rate on a foreign currency loan. If you took out a mortgage at 9% in EUR and the market offers 4–5%, this is a direct reason to refinance.
• Increase in property value. If the apartment or villa has appreciated, the new LTV will be more favorable, and the bank may offer better terms.

When Refinancing Doesn't Make Sense

• Small remaining balance. If there are only 1–3 years left to pay, the fees will "eat up" all potential benefits.
• Rate difference less than 1%. For a foreign currency loan, the savings may not cover the associated costs.
• Sanctions restrictions. For citizens of Russia and Belarus, some Turkish banks may limit the issuance of foreign currency loans due to compliance risks. Each case needs to be clarified individually.
• Unstable income. If your verifiable earnings have decreased, a new bank may reject the application or offer worse terms than the current ones.

Conclusion

Mortgage refinancing in Turkey is a workable tool, but it requires sober calculation and an understanding of local specifics. Classic refinancing with a switch to another bank is available to foreigners, but restructuring within the current bank is more common, especially given the extremely high key interest rate. BDDK gives borrowers additional protection: the ability to stretch payments up to 48 months in case of financial difficulties.

The main rule: before signing a new contract, add up all the fees and compare the total cost of the loan (effective rate) under the current and future scenarios. Consulting with a mortgage broker or independent financial advisor familiar with the Turkish market will help avoid costly mistakes and choose the optimal strategy.